‘€60 million is the tip of the iceberg’ – DIGI
- Short notice nature of stop-start approach and three failed pledges to reopen industry is crippling businesses who are incurring costs with no means of recouping
- On three occasions, the Government signalled a date on which drinks and hospitality businesses may be permitted to reopen before withdrawing permission with little notice and another ‘false-start’
- In Dublin alone, each false start cost up to €7 million in wasted beer stock for Dublin pubs
- DIGI is calling on the government to aid the drinks and hospitality industry by removing barriers to business including cutting Ireland’s excise tax rate, currently the second highest in the EU
- DIGI Chair: “The key challenge for the industry right now is that current Government policy is an outlier compared with other European countries. Ireland is closing far more of our hospitality sector, and for far longer.”
Over €60 million worth of stock, including beer and food, has been written off by drinks and hospitality businesses, namely food serving pubs, as a result of the Government’s ‘stop-start’ approach to reopening the sector so far, according to industry figures supplied by the Drinks Industry Group of Ireland (DIGI).
On three occasions, the Government signalled a date on which so called ‘wet’ pubs and pubs serving food may be permitted to reopen after the extended lockdown – analysis by DIGI shows that Irish pubs and bars have endured the longest lockdown in the EU.
On each occasion, these were false-starts and very short notice was given that businesses were indeed not permitted to reopen, leaving many with extensive stocks of beer and food purchased from suppliers, while customers bookings were made and staff rostered.
The industry estimates that the cost of each of these false starts stands at up to €20 million in terms of beer and food stock. In Dublin alone, each false start cost up to €7 million in wasted beer stock for Dublin pubs.
This is in addition to the investment businesses had, and continue to make, in preparing their premises including cleaning, PPE equipment and staff and wage costs to reopen. A recent survey of publicans showed that almost half took on €16,000 in debt during lockdown to cover staff and business costs, one in five as much as €30,000.
“Drinks and hospitality businesses have endured the longest lockdown in the EU and the short notice nature of the Government’s three failed pledges to reopen the industry is crippling businesses who are incurring costs with no means of recouping them. €60 million is only the tip of the iceberg while we risk a credit crisis in the industry where product is written off and credit terms are reviewed – a situation we need to avoid,” said Liam Reid, Chair of the Drinks Industry Group of Ireland (DIGI).
“Dublin publicans, whose businesses have been caught in the government’s costly and unpredictable stop-start lockdown strategy, will endure further financial strain for the next period of weeks, or it could be months, we don’t know.
“The key challenge for the industry right now is that current Government policy is an outlier compared with other European countries. Ireland is closing far more of our hospitality sector, and for far longer. If this approach is maintained, and we fail to explore other ways of living with Covid and operating our businesses, it will cause long-term and irreparable damage to the sector. The Government needs to urgently look at what other European countries are doing and adapt the current approach.”
The industry’s current commercial environment is bleak: restaurants are operating at approximately 60% capacity, pubs serving food at 50%, and hotels at 25%. These figures are unlikely to improve over Christmas and the winter period. Tourism is non-existent, and few social or cultural activities are permitted.
A report published in July by DCU economist Professor Anthony Foley states that even if open on-trade pub sales will decline by 50% or more for the second half of 2020, which, he states, is “our most optimistic market expectation”.
EMPLOYMENT RISK TO THE SECTOR
Figures were published today as a recent report suggests that as many as 63% of all accommodation and food services jobs in Ireland, 114,000 in total, which includes jobs in pubs, restaurants, and hotels, could be lost by year’s end without further supports. This includes 36,300 jobs among the 15-24 age group.
The report, commissioned by the Drinks Industry Group of Ireland (DIGI) and carried out by Professor Anthony Foley, “Employment in the drinks and hospitality industry: the threat of Covid-19 to jobs and how to minimise it”, says that 7.6% of all national employment is in accommodation and food services – 31.8% of all workers are in the 15-24 age group, and the majority of all employees are women (54.6%).
DIGI is calling on the government to aid the drinks and hospitality industry by removing barriers to business and deliver a comprehensive package of measures to support their recovery.
“We need to consider how best to reopen these businesses and in tandem, focus on the recovery. We must ensure we do all we can to make it as easy as possible to operate within Covid guidelines and support the recovery of this sector and our economy.
“Central to this is jobs and this industry has proven capacity to create and maintain employment. The hospitality sector helped lead Ireland out of the 2008 recession, when one in seven jobs created during the recovery was in this sector. The drinks and hospitality industry can support the recovery now also but needs to be supported to do so. We can do this through using policy measures to deliver targeted support that will have an immediate effect.
“Reducing excise tax by 15% for these businesses is one such targeted measure that can be introduced overnight and have a tangible impact by reducing costs for hospitality businesses.
“Ireland’s excise taxes are the second highest in Europe and will act as a further barrier to recovery. We cannot find ourselves in a situation where our drinks and hospitality businesses reopen and are subject to exceptionally high tax rates, among the highest in the EU.”